GameStop Misses On Earnings, Cuts Forecast; Shares Plummet

In an attempt to make the company more stable financially, GameStop CEO George Sherman recently cut out quarterly dividend payments.  This is an important move for the company leader as they look for any type of stability they can find. After all, GME stock has already plummeted 70 percent over the course of the last year.  Right now, GameStop stock is trading at a 52-week low of $3.15 per share. 

This dramatic shift signals that while Sherman insists he has a lucrative plan to turn the company around, investors appear to be losing faith in GameStop stock.  That is a tough pill to swallow for the largest video game retailer on the planet, with more than 5,700 stores around the world. But even at their size, GameStop same-store sales continue to fall as more and more customers have been buying their games online, directly from distributors.  

And as mobile gaming on smartphones continue to grow—mostly because they are often free or, at least, quite inexpensive—brick-and-mortar shops that specialize in physical game-related media continue to struggle. 

As such, GameStop’s first quarter sales fell 13 percent, year over year, with the company posting an adjusted loss for the quarter of 32 cents per share. That is significantly higher than the 21 cents per share loss analysts had expected. Similarly, GameStop posted that the $1.29 billion in revenue was also definitely lower than the $1.34 billion that had been expected.  

GameStop CFO Jim Bell commented, “While we experienced sales declines across a number of our categories during the quarter, these trends are consistent with what we have historically observed towards the end of a hardware cycle.”

In other specs, GameStop had widened its net losses to $415.3 million—the equivalent of about $4.15 per share—which represents a loss of $24.9 million—or about 24 cents per share.  Excluding a nearly $401 million impairment charge (among other items), all of this puts the company’s adjusted losses at roughly 32 cents per share; 11 cents higher than analyst expectations. 

All in all, same-store sales forecast continues to decline—into the low teens—which is notably higher than the 5 to 10 percent increase analysts had expected. 

Bell goes on to say, “We will continue to manage the underlying businesses to produce meaningful cash returns, while maintaining a strong balance sheet and investing responsibly in our strategic initiatives.”